By Tim Clipstone, Marcus Leese

The Guernsey government is due to bring in new regulations which impose an economic substance test for Guernsey tax-resident companies to meet the requirements of the EU Code of Conduct Group.

The draft regulations which are set to come into force on 1 January (subject to States approval) propose the establishment of new tests for tax resident companies carrying on “relevant activities”, including fund management. The tests require companies that are in scope to demonstrate that they meet the economic substance tests, including that they are “directed and managed” in Guernsey, that certain of their “core income generating activities” are undertaken here, and that the companies have “adequate” premises, employees and expenditure in Guernsey proportionate to the level of relevant activity carried on in Guernsey.